Financial losses, personal betrayals

January 11, 2009|By JEAN MARBELLA

I just can't avert my gaze from the train wreck wrought by Bernard Madoff, the aptly named investor who may have scammed as much as $50 billion from a clientele that included Hollywood, media and sports moguls and major Jewish philanthropies.

I'm riveted by all the gory details: the way people angled to join the Palm Beach Country Club (entry fee: $300,000, plus matching donation to charity) just for the chance to meet and possibly invest with him; how he now might be trying to hide assets by mailing off Cartier and Tiffany baubles and a pair of $200 mittens - $200 mittens? - to relatives.

But beyond the voyeur factor, I think I'm also reading all the coverage with an eye toward evidence that I wouldn't have fallen for Madoff's scheme. Nope, too smart, too cautious, too duly diligent - or, more likely, too cash-poor to have met his minimum investment requirement in the first place.

After talking to Dominic Lynch, though, I think I may be too confident.

"Well, I tell you, when you meet someone like that through a friend, and it's like, this person's done great for us, that's the beginning, and it just goes on from there," he said. "He would be there at parties, he was friendly, Tom Clancy would be there. I never saw anything that looked like a problem."

Lynch is not talking about Bernard Madoff, but he could be. Instead, he is talking about Richard Scott, the man to whom he turned over a nearly $400,000 nest egg.

Scott turned out to be running a fraudulent investment scheme out of a coin-and-stamp store, Goldie's, that he operated in a faded strip mall in Southern Maryland.

I met Lynch about 13 years ago, when another reporter and I were writing about Scott, who ultimately pleaded guilty to securities fraud; authorities estimated that he had cheated some 100 investors out of more than $8 million.

(Because of ailing health, he was allowed to serve a sentence of 18 months of home detention in his Alexandria, Va., home rather than go to prison.)

Reading over some of those stories, I was struck by the similarities to Madoff's much larger and more notorious operation - the clubbiness and intimacy between client and investors, the dash of celebrity provided by the Maryland-based author that gave the operation a sense of legitimacy and, most of all, the way Scott was able to fool so many otherwise smart and savvy people. In addition to Clancy, his victims included a Harvard mathematics professor and a former investigator with the wartime predecessor of the CIA.

Lynch had worked for the Pennsylvania Department of Aging, where he helped develop a prescription drug program for seniors. He was retired when he met Scott, who touted "safe" investments in coins, metals and stocks. Like Madoff, Scott presented clients with documents purporting to show high rates of return, Maryland authorities said. But in reality, they said, much of the clients' money was actually being spent on gambling trips and other personal expenses rather than in those illusory "safe" investments.

Today, Lynch is approaching his 80th birthday living in the rented first floor of someone else's house in Beaver, Pa.

He had to sell his own house after losing all but about $60,000 of his savings, which had come from a lifetime of work and what his father had left him in his will. He doesn't do the traveling that he anticipated he would do after retiring from his job with the state but considers himself lucky that Social Security payments allow him to keep a roof over his head and food on the table.

There were other terrible stories among Scott's victims: A young man whose parents had died in a plane crash lost the money they had left him and had to leave college. Clancy, who became friends with Scott after meeting him through mutual friends at an Orioles game, was particularly angered over the $100,000 he gave Scott to start a college fund for his best friend's children. The friend, whom Clancy had known since their days as classmates at Loyola High in Baltimore, had recently died, and the author had promised him he would take care of his kids.

Now we're hearing the sad tales coming out of the Madoff scandal, particularly among the Jewish charities that trusted him, given his own philanthropy and his reputation on Wall Street, where he had once been NASDAQ chairman. Surely there's an especially horrible fate reserved for someone who, if the accusations turn out to be true, could rip off Elie Weisel, the Holocaust survivor whose foundation had the bulk of its assets, some $15 million, invested with Madoff.